American International Group Inc. has told regulators that letting it fail could cause “turmoil in the U.S. economy and global markets” and wipe out “a number of U.S. life insurers.”

AIG, New York, predicts the calamities that would occur if it failed in a “strictly confidential” document that has undergone several drafts. The draft obtained by the NU Online News Service was dated March 6.

After reporting a $62 billion net loss for the fourth quarter of 2008 last week, AIG announced that the government was providing $30 billion in additional capital and easing the terms of existing financing arrangements.

The measures are necessary, because what happens to AIG “has the potential to trigger a cascading set of further failures, which cannot be stopped except by extraordinary means,” AIG says.

The systemic risk is “principally centered in the ‘life insurance,’ business because it is this subsector that has the greatest variety of investments and obligations that are subject to loss of value of the underlying investments,” AIG says.

The failure of AIG would be “likely to have a cascading impact on a number of U.S. life insurers already weakened by credit losses,” AIG says. “State insurance guarantee funds would be quickly dissipated, leading to even greater runs on the insurance industry.”

Members of Congress have attacked the idea of the government providing more aid for AIG.

Sen. Jim Bunning, R-Ky., told Federal Reserve Vice Chair Donald Kohn at a March 5 Senate Banking Committee hearing, “You will get the biggest ‘no’ you ever got. I will hold the bill. I will do anything possible to stop you from wasting the taxpayers’ money on a lost cause.”

Sen. Robert Menendez, D-N.J., said the Fed is asking for “an open-ended check” that it will not get.

AIG and New York Insurance Superintendent Eric Dinallo, who has received the draft, say do not want to comment on the draft.